EXHIBIT 10.2
SECOND AMENDMENT TO
SECURITY AND LOAN AGREEMENT, DOMESTIC CREDIT
AND ADDENDUM THERETO
This Second Amendment ("Second Amendment") amends that certain Security and Loan
Agreement, Domestic Credit, dated July 28, 1997, ("Loan Agreement") by and
between IMPERIAL BANK ("Bank") and PULSEPOINT COMMUNICATIONS, FORMERLY KNOWN AS
DIGITAL SOUND CORPORATION, ("Borrower") and the Addendum, "Exhibit A,"
("Addendum") thereto, of even date, and the First Amendment to Security and Loan
Agreement, Domestic Credit, and Addendum Thereto ("First Amendment"). The Loan
Agreement, Addendum, and First Amendment are collectively referred to herein as
the "Agreement", and are modified by replacing the Addendum in its entirety as
follows:
ADDENDUM TO SECURITY AND LOAN AGREEMENT, DOMESTIC CREDIT, ("SECURITY AND LOAN
AGREEMENT, DOMESTIC CREDIT") BETWEEN PULSEPOINT COMMUNICATIONS AND IMPERIAL
BANK.
DATED: SEPTEMBER 11, 1998
This Addendum is made and entered into September 11, 1998, between PULSEPOINT
COMMUNICATIONS ("Borrower") and IMPERIAL BANK ("Bank"). In the event of any
inconsistency between the terms herein and the terms of the Security and Loan
Agreement, Domestic Credit, the terms herein shall in all cases govern and
control. All capitalized terms herein, unless otherwise defined herein, shall
have the meaning set forth in the Security and Loan Agreement.
A. Any commitment of Bank, pursuant to the terms of the Security and Loan
Agreement, Domestic Credit, to make advances against Eligible Accounts shall
expire on FEBRUARY 26, 1999 ("Maturity"), subject to Bank's right to renew said
commitment at its sole discretion. Any renewal of the commitment shall not be
binding upon the Bank unless it is in writing and signed by an officer of the
Bank.
B. Condition Subsequent. Borrower shall cause any material copyright
registerable works including software to be promptly registered in the U.S.
Copyright Office and execute and deliver a mortgage of copyrights and amendments
appropriate and acceptable to Bank to perfect Bank's security interest in all
proceeds of such works; and
C. [Intentionally Omitted]
D. Standby Letter of Credit Sublimit. The Credit Limit shall include the sum
of all outstanding standby letters of credit ("Standby L/C") issued for the
account of Borrower, to a maximum of $500,000 as a sublimit of borrowings
hereunder (the "SBLC Sublimit"), provided that the maturity of any standby
letters of credit issued hereunder shall not exceed the Maturity.
1. Automatic renewal provisions. If any Standby L/Cs issued under the
SBLC Sublimit contain automatic renewal provisions that provide for renewal
beyond the
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Maturity, then no later than forty-five (45) days in advance of the
Maturity, Borrower shall pledge to Bank a certificate of deposit ("Cash
Collateral") in an amount equal to that of the outstanding Standby L/Cs
with a maturity of at least fourteen (14) days past the expiration of such
Standby L/Cs.
2. Procedures and fees. Bank may, in its sole discretion within the SBLC
Sublimit, advance as loans, any amounts that are or may become due or owing
to Bank in connection with any Standby L/C. Borrower shall execute all
standard form applications and agreements of Bank in connection with the
issuance of Standby L/Cs, and, without limiting any of the terms of such
applications and agreements, Borrower will pay all standard fees and
charges of Bank in connection with the issuance of and amendments to the
Standby L/Cs.
E. Bank will advance up to 65% of Eligible Accounts up to maximum of
$5,000,000, provided that total borrowings shall not collectively exceed the
Credit Limit as defined herein. Eligible Accounts shall only include such
accounts as Bank in its sole discretion shall determine are eligible from time
to time. "Eligible Accounts" shall also NOT include any of the following:
1. Accounts over 120 days past invoice date;
2. Accounts with respect to which the account debtor is an officer, director,
shareholder, employee, subsidiary or affiliate of Borrower;
3. All Accounts sold to and purchased from a company of common name/ownership,
whereby a potential offset exists;
4. Accounts with respect to which 25% or more of the account debtor's total
accounts or obligations outstanding to Borrower are more than 120 calendar
days from invoice date;
5. For Accounts representing more than 15% of total accounts receivable, the
balance in excess of the 15% is not eligible; except Accounts owed by all
entities affiliated with GTE, which Account balances shall collectively be
included as eligible up to 45% of total accounts receivable, and Accounts owed
by all entities affiliated with Pacific Xxxx and with Nextlink Communications,
which Account balances shall collectively be included as eligible up to 30% of
total accounts receivable;
6. C.O.D. Accounts;
7. Credit balances greater than 120 days from invoice date;
8. Consignment or guaranteed sales;
9. Xxxx and hold Accounts;
10. Equipment rental offsets;
11. Evaluation units;
12. Maintenance contract receivables;
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13. Salesman's accounts for promotional purposes;
14. Collection Accounts;
15. Retentions;
16. Foreign Accounts, except those covered by credit insurance or evidenced by
letter of credit for goods that have been shipped;
17. U.S. Government receivables.
F. Borrower affirmatively covenants that so long as any loans, obligations or
liabilities remain outstanding or unpaid to Bank, it will:
1. Within 10 working days from each month-end, deliver to Bank a detailed
accounts receivable aging reconciled to the general ledger of
Borrower, a detailed accounts payable aging reconciled to the
Borrower's general ledger and setting forth the amount of any book
overdraft or the amount of checks issued but not sent, and cash
balance report with attached copies of bank statements;
a. The preceding will be supported by the following Bank forms:
AC-1 Accounts Receivable and Inventory Transaction Report, AC-
11 Computation of Ineligible Accounts Receivable, and AC-12
Monthly Accounts Receivable Reconciliation;
b. All advances will be supported by the following Bank forms
submitted to Bank on a daily basis, in addition to the
preceding forms: AC-1 Accounts Receivable and Inventory
Transaction Report, AC-2 Schedule of Accounts Receivable
Assigned, and AC-3 Schedule of Collections;
2. On a quarterly basis, provide Bank with an alphabetized list of
customers including addresses;
3. Comply with additional financial reporting requirements as discussed
in the Credit Terms and Conditions dated July 28, 1997 and all
amendments thereto.
G. Notwithstanding the provisions of the Security and Loan Agreement (Accounts
Receivable and/or Inventory), the following provision shall apply to all
obligations of the Borrower to the Bank: All of Borrower's receipts from its
account debtors shall be received at Borrower's lockbox with Bank pursuant to
the Remittance Banking Service Agreement dated August 14, 1997 between Bank and
Borrower. All sums received by Bank, whether from Borrower or from Borrower's
account debtors, shall be applied to the outstanding loan balance on the 2nd
(second) day following receipt thereof by the Bank. Interest shall continue to
accrue on all loans outstanding pursuant to the Loan and Security Agreement
until sums received are applied as herein provided.
H. The rate of interest applicable to the Loan Account shall be one-half
percent (0.50%) per annum in excess of Bank's Prime Rate.
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"Prime Rate" is defined as the rate of interest which Bank has announced as its
prime lending rate which shall vary concurrently with any change in such Prime
Rate. Interest shall be computed at the above rate on the basis of the actual
number of days during which the principal balance of the loan account is
outstanding divided by 360, which shall, for interest computation purposes, be
considered one year. Should Borrower be in default, Bank at its option may
demand payment of any or all of the amount due under the Loan Account including
accrued but unpaid interest, at any time. Notice of such demand may be given
verbally or in writing and should be effective upon receipt by Borrower. The
default rate of interest shall be five percent per year in excess of the rate
otherwise applicable.
I. Fees.
1. Facility Fee. A facility fee will be assessed equal to one-half
percent (0.50%) per annum ("Facility Fee"). Upon the execution of this
Second Amendment, $12,500 shall be due and payable, representing a six
month assessment of the Facility Fee.
2. Non-usage Fee. A non-usage fee of 0.50% per annum will be calculated
and assessed on a quarterly basis, using Borrower's average outstanding
daily loan balance per quarter subtracted from $5,000,000, the product of
which will be multiplied by the pro-rata non-usage fee as calculated on a
360 day basis.
J. Late Charges. If any installment payment, interest payment, principal
payment or principal balance due hereunder is delinquent ten or more days,
Borrower agrees to pay Bank a late charge in the amount of 5% of the payment so
due and unpaid, in addition to the payment; but nothing in this paragraph is to
be construed as any obligation on the part of the Bank to accept payment of any
payment past due or less than the total unpaid principal balance after maturity.
All payments shall be applied first to any late charges owing, then to interest
and the remainder, if any, to principal.
K. Miscellaneous Provisions. Failure or Indulgence Not Waiver. No failure or
delay on the part of your Bank or any holder of Notes Issued hereunder, in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof or of any other right,
power or privilege. All rights and remedies existing under this agreement or
any not issued in connection with a loan that your Bank may make hereunder, are
cumulative to, not exclusive of, any rights or remedies otherwise available.
L. Notice of Default. Borrower shall promptly notify Bank in writing of the
occurrence of any event of default hereunder or any event which upon notice and
lapse of time would be an event of default.
M. Governing Law; Judicial Reference.
1. Governing Law. This Agreement shall be deemed to have been made in the
State of California and the validity, construction, interpretation, and
enforcement hereof, and the rights of the parties hereto, shall be determined
under, governed by, and construed in
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accordance with the internal laws of the State of California, without regard
to principles of conflicts of law.
2. Judicial Reference. The provisions of Section E5, Judicial Reference of
the Credit Terms and Conditions Agreement dated July 28, 1997, executed by the
Borrower in favor of the Bank, are incorporated herein by reference.
N. This Addendum is executed by and on behalf of the parties as of the date
first above written.
O. This Amendment is effective as of September 11, 1998, and the parties
hereby confirm that the Agreement as amended is in full force and effect.
PULSEPOINT COMMUNICATIONS "BORROWER"
BY:
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B. Xxxxxx Xxx
TITLE: Vice President and Chief Financial Officer
IMPERIAL BANK "BANK"
BY:
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Xxxxxxx X. Xxxxxxxx
Title: Vice President
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